AI Regulation in Prior Auth Is Getting Real
There’s been a noticeable shift in how regulators are approaching AI in healthcare. It’s not just buzz anymore, laws are being passed, rules are being finalized, and expectations are changing fast.
What's Changing
States across the country are passing legislation that limits how insurers use AI to approve or deny care, emphasizing the need for human oversight. At the federal level, CMS finalized the Interoperability and Prior Authorization Rule (CMS-0057-F) to improve data exchange and speed up authorizations. Deadlines are approaching, and organizations are taking notice. This momentum is driven, in part, by growing public concern. Reports have surfaced of AI systems denying care at rates far higher than human reviewers, up to 16 times higher in some cases. It’s not hard to see why people are worried.
23 states have enacted PA reform laws
These laws aim to improve transparency, shorten approval timelines, and place limits on how AI is used in healthcare decision-making, particularly around prior authorization.
12+ states have bills in progress
Several states have introduced legislation to establish guardrails on AI in prior authorization, such as Arizona’s HB2175, which would prohibit AI from automatically denying care without licensed clinician review. It has passed the House and is awaiting a Senate vote.
How We’re Thinking About It
At Ethermed, we’ve always taken a supportive approach to AI. Our system automates the tedious parts of prior auth: gathering data, filling in gaps, getting the ball rolling. But clinical judgment stays with the humans who know the patient.
We also believe transparency is essential. Proposals like the one in New York are calling for disclosure when AI plays a role in care decisions, and we support that direction. People deserve to know who and what is involved in their healthcare.
Why It Matters
These aren’t just policy shifts. They reflect growing discomfort with black-box systems and a renewed focus on safety and clarity in healthcare decisions. It’s a pivotal moment for the industry. The real opportunity isn’t just faster decisions, it’s building tools that genuinely support care and restore trust in the system.
We’re going to keep sharing what we’re seeing as the landscape evolves. And if you’re thinking through any of this, we’re happy to chat.
—The Team at Ethermed
